Fiat Lux

Atrios is back after a few days R&R and he's on fire about the upcoming proposed changes to Social Security and the tax code. All the pieces are good, but this is a point I particularly like:

As I've written before, my opposition to a forced savings plan [note to Democrats: "forced savings" has a nice ring to it, and is in fact what such a plan would be.] is largely due to the fact that it opens the door for Fund firms, one way or another, to loot the US Treasury and to loot these mandatory accounts. Conservative trolls like to write "Oh, but if you lose all your money it's all your fault!" which, after I get a good laugh at how stupid they are, depresses the hell out of me. First, investments are not deterministic. They are risky. People who do well in the market like to believe they're "smart investors." Maybe they are. But, most of them just got lucky. Being a "smart investor" means that you know more than the market does, something which can't exist if we believe the markets are efficient, as our conservative trolls usually do.

Emphasis added. And this is where the rubber meets the road:

Someone earning $40,000 per year is going to be putting just $800 per year into one of these accounts.

Mutual fund companies hate low-dollar accounts like this -- they do not make money for the company. And thus, they are going to try to find ways of making these accounts more profitable, to the detriment of the account holders. Tacking on lots of fees is a possibility, although I suspect that the eventual legislation will cover that obvious loophole. A more likely one is a tactic the industry has already been indulging in -- one much easier to abuse:

The Securities and Exchange Commission is investigating about a dozen brokerage firms - including Morgan Stanley, Merrill Lynch, Ameritrade, Charles Schwab and E*Trade Financial - on suspicion that they failed to secure the best available price for stocks they were trading for their customers, according to people who have been briefed on the inquiry.

At issue is the way the companies executed trades of Nasdaq-listed securities when the markets opened in the morning, a period of intense trading activity resulting from the backlog of orders since the market's close the previous day.

After examining trading data from the last four years, the investigation found evidence that trades were often processed in ways that favored the firms over their clients, these people said.

Securing the best price is one of the industry's critical obligations to investors. If the investigators' suspicions are confirmed, these practices are not likely to add up to significant costs for individual investors - the difference would be pennies a share traded - but in total they could represent substantial amounts of money for the brokers.

Frankly, I find the whole thing somewhat academic, because I'm one of those who thinks that the odds are good the entire Social Security system will not exist when it comes time for me to retire. That said, this all sounds to me like a good way to hasten the liklihood of it happening.